Eurobank Q4/FY 2014 results – First Glimpse

Manos Chatzidakis

Eurobank announced a solid set of operating results broadly in line with our estimates while higher provisions and non recurring items deviate net income from estimate of 462 losses.

In specifics:

¡ Net interest income increased by 4.1% q-o-q and reached €394m, from €379m in the third quarter. The expansion of interest income was mainly due to the de-escalation of the cost of deposits in Greece, as the spread of time deposits decreased by 17 basis points in the fourth quarter 2014. Net interest income rose by 4.7% in Greece and 2.4% in international operations. Net interest margin also expanded from 2.04% to 2.11% in the fourth quarter 2014, also helped by the 2 basis points increase in lending spreads.

¡ Net fee and commission income recorded a remarkable increase of 11.4% to €79m in the fourth quarter 2014, mainly due to higher income from insurance, lending, rental and branch network businesses. Fee expansion came both from Greece (+15.0%) and international business (+4.8%). As a result of this expansion, the ratio of fees over total assets increased to 42 basis points in the fourth quarter 2014, from 38 basis points in the previous quarter.

¡ Core income (net interest income and net fee and commission income) was up by 5.2% q-o-q to €473m, €341m in Greece (up 6.2% q-o-q) and €132m in international operations (up 2.9% q-o-q).

¡ Operating expenses amounted to €262m in the fourth quarter 2014, compared to €258m in the third quarter, an increase of 1.8% on the back of higher administrative expenses. On an annual comparable basis, costs were cut by 10.1% over 2013, 11.1% in Greece and 7.2% abroad.

¡ Accumulated provisions reached €9.7bn at the end of the year, accounting for 18.8% of total loans and 56.3% of loans past due over 90 days. The stock of provisions at the end of 2014 is almost aligned with ECB/EBA Comprehensive Assessment projections for the same period.

¡ 90dpd formation was maintained at third quarter’s low levels of €239m. Loans past due over 90 days stood at €17.3bn, accounting for 33.4% of the loan portfolio at the end of 2014.

¡ Deleveraging reversed in the fourth quarter 2014, as Gross customer loans before write-offs increased by €164m. Loans to businesses amounted to €26.7bn, versus €26.5bn in September and loans to households receded to €25.1bn, from €25.3bn.

¡ Deposits were down by €1.8bn to €40.9bn at the end of 2014. Εurosystem funding rose to €12.5bn, from €9.1bn in September, while the loans to deposits ratio reached 103.1%, compared to 99.8%.